[🇧🇩] Banking System in Bangladesh

[Saif]

Legal flaws, decentralisation fuel banking scams: Saddat

Centralised operations, diversified revenue models, and disciplined governance are vital for the recovery of Bangladesh’s banking sector, said Kimiwa Saddat, Managing Director (current charge) of Community Bank Bangladesh PLC...

www.newagebd.net

Legal flaws, decentralisation fuel banking scams: Saddat
Mostafizur Rahman 03 June, 2025, 21:43

Kimiwa Saddat

Centralised operations, diversified revenue models, and disciplined governance are vital for the recovery of Bangladesh’s banking sector, said Kimiwa Saddat, Managing Director (current charge) of Community Bank Bangladesh PLC.

In an interview with New Age Business magazine, the country’s youngest Managing Director identified the decentralised operational structures still followed by most banks as a root cause of unchecked lending, mismanagement, and inefficiencies.Wellness retreats

‘Unless banking operations are consolidated and streamlined, incidents of mismanagement and fraud will continue, undermining public confidence,’ he said, making the remarks at a time when the country’s banking sector is grappling with one of the worst crises in its history.

He noted that banks currently performing well tend to have more centralised control structures, which allow for more effective risk management.

Saddat identified non-performing loans (NPLs) as the most pressing issue facing the banking sector today.

He argued that the problem extends beyond lending discipline and reflects deeper structural inefficiencies.

While stronger banks are adopting centralised models that promote better governance and risk control, many institutions continue to operate in a fragmented manner, hindering systemic reform.

On the issue of supporting a large number of weak banks through capital injections, despite the economic strain on Bangladesh, Saddat acknowledged that the recovery process would require a long-term commitment, potentially spanning three to four decades.

While capital infusion is one option, he emphasised that it should not be seen as the only path forward. Alternatives such as involving depositors as equity stakeholders or implementing targeted restructuring measures must be explored as part of a comprehensive reform agenda.

Kimiwa Saddat

He expressed optimism that the sector would eventually overcome these challenges.

In his view, the market will self-correct over time, and banks currently underperforming will either adapt or be phased out, resulting in a more robust system overall.

Saddat pointed to the turnaround of previously struggling banks, such as Eastern Bank, which are now among the top performers. These success stories, he said, demonstrate that recovery is possible through sound management, transparency, and strategic reform.

He also believes that forensic audits can play a key role in identifying the extent of losses in weaker banks, thereby providing a factual basis for targeted interventions. Solutions could include fresh capital injections by the government, public-private partnerships, or other innovative financial models.

Commenting on the recent push for bank mergers, Saddat struck a cautious note. While acknowledging that mergers and acquisitions are a potential solution, he does not view them as the first or most effective course of action.

In previous instances where strong and weak banks were merged, mere announcements triggered depositor panic and led to falling share prices for listed banks, he noted.

The complexity of merging banks with wide structural differences makes it a risky and challenging process.

Without thorough planning and clear communication, such strategies can backfire, eroding public trust rather than restoring it.

Beyond the challenges posed by decentralised operations, another major obstacle, according to Saddat, is the outdated legal framework — particularly regarding mortgage foreclosure laws and the decision-making processes for handling defaulted loans.

The sale of mortgaged properties often takes between three and seven years due to legal entanglements.

As such, rules governing mortgage foreclosure must be clearly defined, timelines shortened, and responsibilities allocated through a well-structured decision tree.

Saddat emphasised the urgent need to modernise legal and regulatory frameworks. ‘Without legal reform, other structural adjustments will have limited impact,’ he said.

As long as wilful defaulters are able to exploit legal loopholes and obtain indefinite stay orders, banks will remain exposed.

Saddat stressed the need to enforce existing regulatory provisions designed to penalise such defaulters, warning that without enforcement, reform will remain an illusion.

He also highlighted the profitability strategies of foreign banks operating in Bangladesh.

Kimiwa Saddat

He cited Standard Chartered Bank’s recent financial disclosure, which reported profits of over Tk 3,500 crore despite its comparatively smaller loan and deposit base.

Saddat observed that foreign banks such as HSBC succeed by adopting diversified revenue models that do not rely heavily on interest income. Instead, they generate significant fee-based income, strong treasury operations, and non-funded earnings — particularly from trade finance activities such as letters of credit (LCs).

In contrast, many Bangladeshi banks remain heavily reliant on interest income from loans.

Saddat urged local banks to reconsider their business models by drawing lessons from international best practices.

The key difference, he explained, is that foreign banks enjoy greater credibility and trust in global credit markets. Their LCs are widely accepted, whereas Bangladeshi banks often face difficulties in finding foreign correspondents willing to confirm or process LCs due to concerns over credibility.

This disparity restricts the capacity of local banks to expand their non-funded income, putting them at a competitive disadvantage.

Saddat expressed cautious optimism regarding the government’s recently established taskforce on banking reform.

However, he believes that for the taskforce to be effective, it must focus on a few core priorities: regulatory modernisation, strategic centralisation, diversified revenue models, and disciplined governance.

Addressing the recent surge in depositor anxiety and fund withdrawals, Saddat underscored the importance of restoring public confidence.

He argued that regaining trust requires more than financial measures — it calls for transparency, consistent communication, and visible accountability.

Government agencies and banking leaders must work together to reassure the public that deposits are secure, that defaulters will be held to account, and that reforms are being implemented with genuine commitment and urgency, he said.​

 

[Saif]

Five underperforming banks to merge into Islamic bank

Bangladesh Bank will merge five underperforming Islamic banks into a single entity, which will be structured in line with Shariah-compliant banking principles. The decision came at a meeting on Wednesday, where Bangladesh Bank Governor Ahsan H Mansur met with the managing directors and chairperson

thefinancialexpress.com.bd

Five underperforming banks to merge into Islamic bank
bdnews24.com
Published :
Jun 05, 2025 18:37
Updated :
Jun 05, 2025 18:37

Bangladesh Bank will merge five underperforming Islamic banks into a single entity, which will be structured in line with Shariah-compliant banking principles.

The decision came at a meeting on Wednesday, where Bangladesh Bank Governor Ahsan H Mansur met with the managing directors and chairpersons of the five banks.

According to First Security Islami Bank Chairman Abdul Mannan, the banks involved are Social Islami Bank, Global Islami Bank, First Security Islami Bank, Union Bank, and EXIM Bank.

Four of these banks were previously controlled by Saiful Alam, a Chattogram-based businessman known for his close ties to deposed prime minister Sheikh Hasina.

EXIM Bank’s board was under the control of Nazrul Islam Mazumder, also a close associate of Hasina.

The merger process is expected to begin after Eid-ul-Azha, taking approximately three and a half months.

A new board will be formed, comprising existing board members and representatives from various sectors. Until the merger is complete, the banks will operate under the direct supervision of the central bank.

It has also been decided that the newly formed bank must reduce its total defaulted loans to below 10 percent. The banks’ assets will be consolidated, and bad assets will be transferred to a management company.

A fresh banking licence will be issued by Bangladesh Bank for the newly formed entity. The government, along with international development partners, will provide the required capital. Budgetary allocations have already been made in the 2025-26 fiscal year.

The entire process will be carried out under the upcoming Bank Resolution Ordinance 2025.

Mannan expressed optimism that the move would bring much-needed stability to the banks, and confirmed that the new bank will follow a fully Shariah-compliant model.

He also acknowledged that most of the loans that were issued while these banks were under S Alam Group’s influence have turned into defaults, severely weakening their financial position.

“After the merger, the number of branches will increase and customer service will improve,” he added.

“Initially, these banks will be brought under state control, after which the government will seek foreign investors for privatisation,” Mannan said.​

 

[Saif]

Banks fail to implement BB directive to keep adequate cash at ATMs during Eid holidays

Banks have failed to follow Bangladesh Bank's (BB) instructions to keep ATM boothsin service during the Eid holidays. There is a 10-day holiday from June 5 to June 14 on the occasion of Eid-ul-Azha. Banks are also closed during this holiday. As a result, ATM booths have become the only hope for w

thefinancialexpress.com.bd

Banks fail to implement BB directive to keep adequate cash at ATMs during Eid holidays

Published :
Jun 13, 2025 00:17
Updated :
Jun 13, 2025 00:17

Banks have failed to follow Bangladesh Bank's (BB) instructions to keep ATM boothsin service during the Eid holidays.

There is a 10-day holiday from June 5 to June 14 on the occasion of Eid-ul-Azha. Banks are also closed during this holiday.

As a result, ATM booths have become the only hope for withdrawing cash. But during this long Eid holiday, the booths have not provided the desired service. Customers are facing hardships.

Most of the ATMs in Dhaka city are now out of service or out of operation. The same is true of ATMs located in different districts.

The central bank announced in a circular on May 29 that all scheduled banks in the country will have to provide sufficient money to their ATM booths to allow customers to make smooth financial transactions during the Eid holiday.

Bangladesh Bank instructs commercial banks every year before Eid to keep sufficient money in the booths and have a system for refilling around the clock. But in reality, this is not reflected.

Several bank officials told UNB that ATM booths are usually operated in two ways - one is a booth attached to the bank branch, and the other is a separate or independent booth. The booths adjacent to the branch are operated by that branch.

Since the banks were closed last Thursday during the Eid holiday, new money could not be deposited in these booths because all the branch officials were on leave. However, some banks have taken special initiatives and have kept some officials in charge only for filling money in ATMs.

As a result, although some booths had money, most were empty.

An official of Bangladesh Bank said, "We have already given instructions so that sufficient money is kept in each booth."

However, there are complaints at the field level that many banks are not following those instructions.​

 

[Saif]

Local, foreign banks scramble for LC financing

Six proposals from national and international commercial banks have so far been received as the bankers queue up for funding Bangladesh's LNG import with the World Bank playing the guarantor, officials said. Now, they said, the country's energy and mineral resources corporation - nicknamed Pet

thefinancialexpress.com.bd

WB-GUARANTEED REVOLVING FUND FOR LNG IMPORT
Local, foreign banks scramble for LC financing
First-year guarantee to fetch $350m under 'Revolving LC facilities' scheme

FHM HUAMAYN KABIR
Published :
Jun 13, 2025 00:51
Updated :
Jun 13, 2025 00:51

Six proposals from national and international commercial banks have so far been received as the bankers queue up for funding Bangladesh's LNG import with the World Bank playing the guarantor, officials said.

Now, they said, the country's energy and mineral resources corporation - nicknamed Petrobangla -- is negotiating with the aspirant banks on the possible rate of interest on their loans and other charges for the import of liquefied natural gas from the global market.

The World Bank's soft lending window, the International Development Association (IDA), has come forward with a US$350 million worth of loan guarantee for facilitating the fuel import to meet Bangladesh's growing energy demand, they said.

"We have got six expressions of interest (EoIs) from national and international banks. Now we are negotiating with them on the rate of interest and other charges," a senior Petrobangla official told the FE Thursday.

They have a plan to suggest the commercial banks to form a consortium to support the government in importing LNG with the guarantee of the multilateral funding agency.

The Washington-based lender's soft-lending window has assured Bangladesh of underwriting loans needed to foot the bill worth $350 million for LNG import. This amount falls under a 'Revolving LC facilities' scheme.

"In the first phase, we have talked to the aspirant commercial banks on their LC-opening rate and charges for other services for the LNG import. We hope we will get a competitive rate from them," says a senior Energy and Mineral Resources Division (EMRD) official.

"After finalising deal with the commercial banks or with their consortium, we will welcome the IDA's guarantee scheme and will open LCs for importing the LNG."

The EMRD considers the WB proposal as a new avenue for Bangladesh in LNG supply to feed the country's growing fuel demand.

Another senior EMRD official says although the WB has proposed to help Bangladesh in importing liquefied natural gas or LNG worth up to $350 million annually from the international market, it also offers that the facility will be enhanced over the next seven years.

The proposed first tranche of credits for the first year will be a 'revolving LC facility' for securing the corporation's long-term working capital for smooth import of the liquid gas that supplements the supplies from the national gas grid amid gas-exploration stalemate in the country.

According to the proposal, for the revolving LC-facilitating funds the IDA will charge SOFR-plus 2.0 per cent. Its LC-opening period will be three months and the repayment period nine months.

The EMERD official says after getting the EoI from the commercial banks, they will compare the proposal with other financing facilities like the ongoing credit facility from the Islamic Development Bank (IsDB)'s ITFC.

"If we find it concessional than the other existing facilities, we will go for taking the IDA offer."

The ITFC has recently confirmed $600 million worth of loans for Bangladesh to import fuels and fertilisers from the overseas market.

Bangladesh government will borrow $600 million from the ITFC to import fuel oils, LNG, and fertilisers. The loan will carry an interest rate of six-month SOFR-plus 1.80 per cent, along with a 0.2-percent administrative fee.

As per IDA's proposal, some local and foreign banks will arrange the loan for opening LNG- import LCs. The IDA will be the guarantor on the loans from the commercial banks on behalf of the importer, the state-run Petrobangla.

Following Bangladesh's natural gas-supply shortages from its own gas fields across the country-largely for neglecting new exploration-it has imported the liquid gas from overseas market over the last few years in a bid to meet local energy demand.

The LNG import started in the 2018-2019 period. Since then, the imported fuel has played a vital role in meeting the country's growing gas demand.

In 2022, the country imported a substantial quantity of LNG, to the tune 5.06 million metric tonnes, from Qatar Gas, Oman Trading, and the spot market at a cost of US$4.555 billion.

Last year, a total of 86 LNG cargoes were imported-- 56 from long-term suppliers and 30 from spot market, the official mentions.

Bangladesh will need to import 30-Mtpa LNG to meet the growing local demand by 2041 as domestic gas reserves are depleting fast, according to a global report of the Copenhagen-based research firm Ramboll in association with Geological Survey of Denmark and EQMS Consulting Limited.

The country's "existing gas reserves will run out by 2038 if no new exploration and discovery take place," the report reads about the alert.​

 

[Saif]

Bridging banking divide for balanced growth

The issue of disparity between the rich and the poor, as well as between urban and rural areas, is a frequent topic of discussion, especially in seminars and academic forums. Today's reliance on the market system has only exacerbated this economic imbalance by disregarding the interest of the non-c

thefinancialexpress.com.bd

Bridging banking divide for balanced growth

Published :
Jun 16, 2025 00:17
Updated :
Jun 16, 2025 00:17

The issue of disparity between the rich and the poor, as well as between urban and rural areas, is a frequent topic of discussion, especially in seminars and academic forums. Today's reliance on the market system has only exacerbated this economic imbalance by disregarding the interest of the non-competitive people. A recent Financial Express report brings to light yet another dimension of this divide. Citing data from Bangladesh Bank, the report reveals a disturbing disparity in bank loan disbursement: while over 68 per cent of the population resides in rural areas, only 8 per cent of total bank credit is directed there. This stark imbalance not only reflects skewed development priorities but also entrenches structural inequalities by depriving rural enterprises of vital financial support.

In the absence of bank loans or due to the difficulty in accessing them, microfinance institutions (MFIs), particularly non-governmental organizations (NGOs), have become a primary source of credit in rural areas. Despite the relatively high interest rates charged by NGOs, rural borrowers often turn to them due to the unavailability of credit from traditional banks or the stringent conditions imposed by formal financial institutions. Although MFI interest rates have declined in recent years due to increased competition among microlenders in rural regions, interest rates on microcredit are still considerably higher than those offered by banking channels. These high-cost loans drive up production costs and undermine the competitiveness of rural entrepreneurs.

Meanwhile, although the prevalence of mahajans or loan sharks has decreased following the expansion of MFIs, moneylenders have not disappeared. In many areas, rural borrowers continue to turn to informal lenders to meet urgent financial needs, largely due to limited access to formal banking services. A recent research report by the Bangladesh Institute of Development Studies (BIDS) reveals that moneylenders charge an average interest rate of 145 per cent. Despite such exorbitant rates, 20-30 per cent of rural borrowers still rely on moneylenders, while around 50 per cent obtain loans from NGOs.

This limited access to formal banking channels in rural Bangladesh is not merely a matter of inadequate banking penetration - it poses a serious threat to the very notion of balanced and sustainable development. When rural clients are systematically excluded from access to capital, it stunts their economic potential and limits opportunities for upward mobility. Growth becomes increasingly urban-centric, while poverty and underemployment become deeply entrenched in the countryside. Farmers and rural entrepreneurs, who play a vital role in the national economy, are left to grapple with persistent financial challenges - often worsened by natural disasters such as floods. Strengthening credit availability at reasonable rates is, therefore, essential to easing these constraints and promoting sustainable development in rural areas.

To this end, long-term policies must be adopted that prioritise rural financial inclusion and ensure that credit reaches underserved populations effectively. Financial institutions - both banks and NGOs - need to simplify loan procedures by minimising paperwork and tailoring requirements to the realities of rural borrowers. Encouragingly, mobile financial services (MFS) and agent banking have begun to transform the financial landscape in rural Bangladesh. These innovations are bringing banking services closer to the doorstep of rural residents, eliminating the need for physical travel to distant branches. Agent banking, in particular, is gaining traction as a viable banking channel. Expanding credit facilities through agent banking and MFS platforms could significantly transform rural access to finance by providing faster, more accessible, and user-friendly services. Ultimately, bridging the rural-urban banking divide is a must for achieving equitable economic growth.​

 

[Saif]

Classified bank loans balloon fast to a record high

Classified loans in Bangladesh's banking industry made a quantum leap by around Tk 750 billion in just three months to a record high as of March, stoking concerns across the sector. With such leaps in the volume of non-performing loans (NPLs), the aggregate hit Tk 4.20 trillion by the end

thefinancialexpress.com.bd

ABSENTEE BIG ACCOUNT-HOLDERS, CHANGED ACCOUNTING MAJOR FACTORS
Classified bank loans balloon fast to a record high
NPLs rise by Tk750b in three months to Tk4.20t by March end

JUBAIR HASAN
Published :
Jun 16, 2025 00:32
Updated :
Jun 16, 2025 00:32

Classified loans in Bangladesh's banking industry made a quantum leap by around Tk 750 billion in just three months to a record high as of March, stoking concerns across the sector.

With such leaps in the volume of non-performing loans (NPLs), the aggregate hit Tk 4.20 trillion by the end of March 2025, accounting for 24.13 per cent of the entire loans worth Tk 17.42 trillion disbursed by the country's 61 commercial banks.

Constrained by such a record volume of dud money, banks have become extremely conservative and limit their credit supply to the borrowers. Besides, banks' profitability is also dented as they have to maintain a portion of funds for NPL provisioning.

The country's central bank, Bangladesh Bank (BB), predicts that the rising trend in NPLs would continue in the coming quarters as it revised overdue-status-counting system for term lending to a curtailed tenure of six months from previous nine months.

According to the central bankers, this counting arithmetic will be revised further from March 31, 2025 onwards when such loans will be classified within three months instead of the current six months.

According to the data, the share of classified loans rose to 24.13 per cent of the total outstanding loans during the period under review from 11.11 per cent a year before.

Classified loans include substandard, doubtful and bad/loss of total outstanding credits. Of the classified loans, the share of bad loans was 81.38 per cent or Tk 3.41 trillion.

In terms of the category of banks, the ratio of classified loans in the state-owned commercial banks (SoCBs), like on other occasions, remained high.

During the period, the total amount of NPLs with six state-owned SoCBs rose to Tk 1.64 trillion or 45.79 per cent.

On the other hand, the total amount of classified loans with 43 private commercial banks (PCBs) reached Tk 2.64 trillion or 20.16 per cent until March last.

The NPLs of nine foreign commercial banks (FCBs), on the other hand, rose to Tk 32.38 billion or 4.83 per cent during the period under review.

The classified loans with three specialised banks (SBs), however, rose to Tk 64.94 billion (14.47 per cent) by end of March last from 64.32 billion in Q4 of 2024.

Such faster NPL buildup in banks caused serious concerns to bankers who fear further pressure on their liquidity situation in the months ahead. Managing Director and CEO of City Bank Mashrur Arefin says the rise in the volume of NPLs was expected as a "vicious circle took control of some of the banks and laundered public money from banking system" during the previous regime.

Also were there lots of business accounts opened in the last 15 years by people blessed by the then ruling government. But, after the changeover in state power following the July-August mass uprising, those business accounts went into hibernation in terms of sales turnover or cash-flow generation, which also contributed to the significant rise in the NPLs.

"Moreover, the compliance with international standards of classified- loan recognition as of 31st March played a significant role," he further notes about the reasons why such a spurt in non-performing loans.

Mr Mashrur, also ABB Vice Chairman, feels that the banks here need to understand that it is a business of high credit risk, including the investment risk in capital market. "So, right Credit Risk Management (CRM) framework and Board Risk Management Committee (BRMC) are a must to have."

Managing director and chief executive officer of Mutual Trust Bank (MTB) Syed Mahbubur Rahman says the real picture of NPL in banks started getting exposed in the changed context now.

He feels the volume of dud loans could increase further in the months ahead following implementation of a new classified-loan-counting system.

Apart from steps to ensure governance, the experienced banker suggests that the business-hurting external factors need to be in favour to ensure smooth business operations.

"We need to be more careful in future," he says in an alert note over the rapidly-changing global scenarios affecting trade and business.

Managing director and CEO of the country's largest state-owned lender, Sonali Bank, Md. Shawkat Ali Khan says they have intensified their cash-recovery drive which is a top priority to cut down the burden of NPL significantly.

"And people will see its results in the coming quarters. We want to convert the non-performing loans to performing assets and lend it to CMSMEs. It's our target now--and we'll do it anyhow," he told The Financial Express Sunday.

Currently, Sonali bank has 19-percent NPL, the lowest among the state-owned commercial banks.​